[PPT] - Abatement Performance Evaluation of Climate Policies in China- A PowerPoint Presentation

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Abatement Performance Evaluation

f Climate Policies in China-

A Study based on Integrated Assessment Model

Lei Zhu, Pan Peng, Ying Fan

Center for Energy and Environmental Policy Research Institute of Policy and Management Chinese Academy of Sciences Prepared for the 21th AIM International Workshop, NIES, Tsukuba, JAPAN, 2015

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Content

 Introduction  Model  Empirical study  Result and analysis  Intro to CEEP

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Introduction

Countries need to adopt measures/policies to control domestic greenhouse

gas (GHG) emission in response to global climate change

The implementation of climate policies has two sides

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Cost Benefit

Externality internalization

Increasing energy cost

Social output limit

Climate damage definition

Climate damage offset

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Introduction

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In general, climate policies evaluation has two aspects:

Cost-Effectiveness Analysis (CEA) Cost-Benefit Analysis (CBA)

 GDP loss  Consumption loss  Energy cost increase  Energy investment increase  Cost  Benefit：damage avoided

The

relative cost advantage between different energy technologies may be adjusted

Increasing energy cost in the short term
Social output will be limited because of

the shortage of energy supply

Substantial

energy investment for promoting non-fossil energy technologies

Consumption of final goods limits

（van der Zwaan et al., 2002; Gerlagh et al., 2004, 2006; Duan et al., 2014;Zhu et al., 2014） (Source：Manne et al., 1995)

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 The global response to climate change has been influenced to a great extent by particular regions with large CO2 emissions (e.g. the USA, the EU and China)  China, the world’s largest developing country, is the nation with the greatest CO2 emission; approximately 92 million tons in 2012, which is around 26.72% of total global emission (BP, 2013).

Introduction

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Therefore, the implementation

f

China’s climate policies can not only impact

n

domestic sustainable development, but can also have a direct effect on the performance of global actions on climate change

Source：BP，wind

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Introduction

 Several difficulties exist in policy evaluation based on integrated general equilibrium models in single region:

 Difficult to clearly consider and describe the characteristics of specific regional economic development, as well as energy use  In addition to the global temperature target, countries can adopt different types of domestic emission reduction measures, or policy mix  Due to the global greenhouse effect, climate damage in a specific region is directly influenced by the global CO2 emission, not by the region itself (Nordhaus and Boyer, 2000)

 Our Work

 To better analyze and evaluate abatement performance of a specific region in the medium- and long-term, we establish a modified single-region version of DEMETER model (DEMETER-R), to evaluate China’s climate policies

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Model

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Model: DEMETER-R
Subject: social welfare maximization
Agent: consumer 、 fossil energy sector and

non-fossil energy sector

Technological change: AEEI 、 LBD 、 LBS

curve

Climate module: multi-stratum carbon

recycle system (Nordhaus and Boyer, 2000)

Term: 2010-2150
Policies:

fixed carbon tax, dynamic carbon tax, and mixed policy

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Definition Equation

Emission ratio Market damage factor Non-market damage factor Regional climate damage Output distribution

Model

Definition of Regional Climate Loss

 Regional and Global Emission Ratio Setting  Multi-stratum carbon recycle system (Nordhaus and Boyer, 2000)  Market and Non-Market Climate Loss (Manne et al., 1995)

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ROW domestic t t t

Em Em = Θ  

2

1 d t t

D d TEMP = ⋅

4

3

/ (1 100 exp( 0.23 / )

d t t t t

WTP d TEMP GDP L = ⋅ + ⋅ − ⋅ ( )

t t t t

Damage MD WTP GDP = + ⋅ =

C k t t t t k

Y GDP Damage M + +∑

‘Burden’

The abatement ratio of China compared to the world will increase when its CO2 emission share decreases compared to the world

Free-riding’

Conversely, the abatement ratio of China will decrease compared to the world when its CO2 emission share increases compared to the world

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Model

Abatement Performance Measure

 Cost-Effectiveness Performance

Consumption Loss (CL)
GDP Loss (GL)
Energy Cost Increase (EC)
Energy Investment Increase (EI)

 Cost-Benefit Performance

Consumption loss Cost Benefit Ratio (CBR)
GDP Loss CBR
Energy Cost Increase CBR
Energy Investment Increase CBR

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Empirical Study

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Scenario Setting

In the BAU scenario, the emission share between the world and China was calculated by the estimate of CO2 emission of global DEMETER and DEMETER-R under the BAU scenario

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Result and analysis

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Group 1 (Case 1-6)
The results show that the performance of

dynamic carbon tax from the perspective of cost-effectiveness is clearly better than that

f fixed carbon tax
But the implementation of fixed carbon tax

will lead to a lower GL and EC cost-benefit ratio, which are interpreted as better cost- benefit efficiency of fixed carbon tax

Standardization Exponentiation Normalization

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Result and analysis

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Group 2 (Case 7-10)
For these two policies, the four cost effectiveness factors declined with ‘burden’ and increased with ‘free-

riding’

However, the EC and EI cost-benefit efficiency factors increased with ‘burden’ and decreased with ‘free-riding’

Figure 3. Four types of cost effectiveness factor under 450 ppmv Figure 4. Four types of cost benefit efficiency factor under 450 ppmv

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http://www.ceep.cas.cn/en/

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碳排放交易

地区 1

增加฀ ฀本 ฀฀ 化石能源能源 ฀力煤石油成品油天然气焦炭中฀投入 ฀฀出固定฀本形成 ฀投฀ ฀存居民消฀ 居民฀蓄 ฀฀收入 ฀接税 ฀本收入 ฀移支付政府消฀ 政府฀蓄关税 ฀฀等企฀税 ฀移支付生฀税企฀消฀ 企฀฀蓄直接税 ฀本收入 ฀移支付出口国内฀品 ฀口品 ฀口 ฀本收入出口 ฀移支付国外฀蓄

生产模块投资模块贸易模块世界模块政府模块企业模块居民模块区域间产品贸易

排放฀ 碳排放碳排放

环境模块产品价值流区域间碳交易区域内碳交易

地区2 其他地区

1. . . k

Models in CEEP-CAS

1. MRCGE Model

– China multi-regional resource-environment dynamic computational general equilibrium model (MRCGE) – 30 Provinces, 42 Sectors – Energy Market, Commodity Market, Emission Trading Market

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Models in CEEP-CAS

2. CE3METL

Model

– Long-term dynamic

ptimal economic

development model, – including economic, energy, and environment/climate modules – A policy logistic sub- module has been introduced to energy module to describe the learning and diffusion among non- fossil and fossil energy technologies

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Economy Energy Climate

Utility

NUC HYD BIO WIND OTHER

Coal

Consumption Capital Emission limits CO2 Emissions Climate feedback Labor Energy costs Energy inputs LBD

Oil Gas

IGCC-CCS PC-CCS PC Carbon-free ET Fossil ET Lower carbon ET Net exports Investment

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Models in CEEP-CAS

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3. ETS-Agent Model

– A system for emission trading simulation. – Agents are set as the firms covered by ETS. The diversities among firms are reflected at the output, initial emission intensity, and emission abatement technology set. – Rules of agents: emission abatement strategy, allowance trading strategy, expectation of carbon price.

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Models in CEEP-CAS

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4. Bottom-up-

based MACCs

– Analyze the production process in energy-intensive sectors, complete a list of all technology

ptions for emission

reduction. – Normalize each technology under ‘Cost of Supply Curves (CSC)’ and rank them according to their cost for per unit energy saving/emission abatement.

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18.87% 21.37% 24.96% 25.48% 25.92% 26.36% 26.65% 26.71% 29.68% 45.98 45.74 43.87 43.30 42.06 41.91 41.77 41.68 40.12 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 30.00 32.00 34.00 36.00 38.00 40.00 42.00 44.00 46.00 48.00 50.00 Case 1 Base case Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 All trade

Cost saving equilibrium allowance price(RMB/CO2) cost saving allowance price 3.95 4 4.05 4.1 4.15 4.2 4.25 4.3 0.05 0.1 0.15 0.2 0.25 1 3 5 7 9 111315171921232527293133353739414345474951 market share allowance price（Godal）

Models in CEEP-CAS

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5. Partial

Equilibrium Analysis

– Based on the analysis framework

f environmental

economics – Modeling the emission control behaviors of specific firms/sectors covered by ETS – Transparency and flexibility

6.9 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 8 0.1 0.2 0.3 0.4 0.5 0.6 1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145 154 163 172 181 market share allowance price（Godal）

0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00% 0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00% 70.00% 80.00% 90.00% 100.00%

Accumlated share of emissions Accumulated share of firms Beijing Tianjin Shanghai Chongqing Hubei Guangdong(except Shenzhen) Shenzhen

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Models in CEEP-CAS

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6. Evaluation Model for Low-Carbon Technologies

– Based on the Real options approach, taking consideration of several uncertainty factors and the investment flexibility. – Model is numerically solved by the Least-Squares Monte-Carlo approach, to investigate the possibility of the technology investment under different policy scenarios.

0.5 1 1.5 2 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Electricity Price (yuan/kWh) Simulated paths=250

c

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Abatement Performance Evaluation

A Study based on Integrated Assessment Model

Lei Zhu, Pan Peng, Ying Fan

Content

 Introduction  Model  Empirical study  Result and analysis  Intro to CEEP

Introduction

gas (GHG) emission in response to global climate change

3

Cost Benefit

Social output limit

Climate damage offset

Introduction

Introduction

Introduction

 Several difficulties exist in policy evaluation based on integrated general equilibrium models in single region:

 Our Work

 To better analyze and evaluate abatement performance of a specific region in the medium- and long-term, we establish a modified single-region version of DEMETER model (DEMETER-R), to evaluate China’s climate policies

Model

Definition Equation

Model

Model

Empirical Study

Result and analysis

Result and analysis

http://www.ceep.cas.cn/en/

Models in CEEP-CAS

– China multi-regional resource-environment dynamic computational general equilibrium model (MRCGE) – 30 Provinces, 42 Sectors – Energy Market, Commodity Market, Emission Trading Market

Models in CEEP-CAS

Model

– Long-term dynamic

development model, – including economic, energy, and environment/climate modules – A policy logistic sub- module has been introduced to energy module to describe the learning and diffusion among non- fossil and fossil energy technologies

Economy Energy Climate

Utility

Models in CEEP-CAS

Models in CEEP-CAS

based MACCs

– Analyze the production process in energy-intensive sectors, complete a list of all technology

reduction. – Normalize each technology under ‘Cost of Supply Curves (CSC)’ and rank them according to their cost for per unit energy saving/emission abatement.

Models in CEEP-CAS

Equilibrium Analysis

– Based on the analysis framework

economics – Modeling the emission control behaviors of specific firms/sectors covered by ETS – Transparency and flexibility

Models in CEEP-CAS

– Based on the Real options approach, taking consideration of several uncertainty factors and the investment flexibility. – Model is numerically solved by the Least-Squares Monte-Carlo approach, to investigate the possibility of the technology investment under different policy scenarios.

Thanks a lot!

Lei ZHU lions85509050@gmail.com